When it comes to insurance, tell people not to panic, but to start searching for replacement coverage right away. Most states require that insurers provide an advance notice of cancellation — 120 days in Florida and 75 days in California — but those days can go by pretty quickly. So the sooner the search begins, the better.
Some people will hunt for another insurer on their own. But an independent agent who works with multiple companies can take over the leg work. I used such an agent when coverage was dropped on my Florida residence, and she found a replacement policy that was actually less expensive than the original one.
Under a worst case scenario, some states offer coverage through state-run companies for consumers who can’t find coverage from a private company. Although it was meant to be a backstop for home owners, Florida’s Citizen Property Insurance Corp. Is now the Sunshine State’s largest insurer.
As far as student loans are concerned, reach out to every owner on your books, advising them that if they have such debt, you’re here to help. “Think of yourselves as rapid responders,” Mason of Clarifire advises.
Once you aggregate that group, use your technology to target it with a specific campaign.
You might be able to offer borrowers the chance to consolidate their school loans into their mortgages, perhaps at a better rate then they have now. Or perhaps you can direct them to government sites (see sidebar) that suggest ways out of their dilemmas.
Above all, though, “communicating is very important,” says Mason. “Use your marketing teams to create outreach programs and use your technology to offer rapid responses.”
Freddie Weighs In On Student Debt
Freddie Mac has updated its guidance on how to handle student debt loan payments for would-be borrowers with education loans.
Effective as of early September, lenders must specify an amount greater than zero when calculating the borrower’s debt-to-income ratio. Even loans with income-driven repayment plans must state something other than zero.
For student loans in deferment, forbearance or repayment, including income-driven plans, if the monthly payment is greater than zero, lenders must use that amount unless other documentation supports a different figure. If the payment is zero, 0.5 percent of the outstanding loan balance must be used, according to the Freddie’s Seller-Servicer Guide.
However, education debt may be excluded from the DTI calculation if the borrower has 10 or fewer payments left until the balance is paid in full, forgiven, canceled or otherwise discharged AND the borrower is eligible or approved for forgiveness, cancellation or, in the case of an employment-contingent repayment program, there is no evidence the borrower will become ineligible in the future.
As of this writing, Fannie Mae has not weighed in on how it wants its sellers to handle student debt.
Helping Borrowers With Student Debt
The Biden Administration is hoping a new income-driven federal student loan repayment plan will ease the transition for at least some of 28 million borrowers who had to start repaying their loans in October
The SAVE (Saving on a Valuable Education) plan reduces repayment amounts compared to previous income-driven plans. It allows borrowers to make monthly payments based on both their incomes and family sizes, with any remaining balances forgiven at the end of the 20 to 25-year repayment period.
For typical community college borrowers with up to $12,000 in outstanding loan balances, SAVE reduces the time to forgiveness to as little as 10 years. It also ensures that enrolled borrowers who make their payments on time do not incur growing loan balances because of accrued interest.
At the same time, the U.S. Department of Education has begun automatic discharges for 804,000 borrowers who qualify for a portion of the $39 billion in relief made available because of “fixes” earlier this year to IDR plans.
The discharges are meant for borrowers who never received the amnesty they earned after making payments for decades. Borrowers who have accumulated the equivalent of either 20 or 25 years of qualifying months are eligible.
Meanwhile, there are options for repaying both federal and private student loans, though they are somewhat different for each category. Savvy servicers will find out what they are and notify their borrowers about them. But at the very least, they should tell people where to find them – www.usaw.gov or https://studentaid.gov/manage-loans/forgiveness-cancellation.
Federal loans offer a variety of income-driven repayment (IDR) plans that base payments on the borrower’s income and household size. The Department of Education’s loan simulator can help people pick a plan that best meet theirs needs.
Those with private loans must ask for relief. Private lenders are not required to grant respite, but if your investor is amenable, advise borrowers they will have to show proof of hardship and how much you can safely afford to pay.
Also advise borrowers they needn’t pay for assistance in figuring out how to proceed, More than a few people have been scammed into paying hefty fees for what should be a free service. Recently, the Federal Trade Commission and the U.S. Department of Labor started sending payments totaling more than $9 million to 22,500 consumers who lost money to a company operating a bogus student debt relief scheme. The outfit’s owner was convicted on criminal charges in connection with the dodge.